How can CIBP leverage a coordinated way for a meaningful
                                  and collaborative innovation throughout its community?
                                          Taking on this challenge, the CIBP team            product trends, the SPRINT team will deep dive
                                       designed a solution: the SPRINT.                      in the matter with data and cases and share same
                                                                                             report drafts to encourage CIBP members to share
                                           The SPRINT connects and engages specialists       their own experience. After that, an insightful and
                                       and seniors in an international approach of           practical report will be produced.
                                       innovation and technology. This is a collaboration
                                       from inside and outside CIBP members to generate          Community engagement is the backbone of a
                                       knowledge, tools and experiences to be used by all    successful SPRINT. Reach out to the CIBP team to
                                       members. Based on a methodology of innovation         co-create the next one.
                                       sprints, our focus is to produce relevant material
                                       from within the community to serve real challenges.

                                           How does this work?

                                           After selecting a theme of innovation and
                                       technology that has multiple implications in
                                       banking and financial services, in coop models or
Executive Summary
   This report provides an analysis of cooperative governance, discussing the uniqueness
elements of cooperative model that shape policies and practices in the relations with customers,
members and the board. This report also puts a light on the impacts and opportunities of
technologies in governance models.

    Three specialists collaborated with the discussions in this report, contributing with their
researches and outlook. Mr. Eric Lamarque, author of several articles and books on the management
of banks, shares his findings in building a framework to assess different governance models,
considering important aspects such as number of decision-making levels and the influence and
authority of each level. Mr. Pedro Andrade, a blockchain enthusiast entrepreneur, points out
the opportunities towards innovation and technology, in which blockchain and digital tools can
foster trust, transparency and participation in decision-making processes. Mr. Raymond Oliger,
former President of Banque Populaire Lorraine Champagne and of the Fédération Nationale des
Banques Populaires, draws attention to the importance of assessing coop governance model in
the face of principles of cooperative governance, highlighting criteria like balance, transparency,
credibility, independence and sustainability.

   The report gathers different references to help financial coop institutions to rethink their
governance model, making possible to evaluate how their practices are leveraging coop values
and to evaluate their readiness to adopt technology trends.
  Introduction                              05
  Coop Governance Model                     06
  Technology and Governance                 08

  Governance Models                         11
  Blockchain Opportunities and Challenges   14
  Coop Governance and Principles            16

 Conclusion and Outlook                     19
 References                                 20
    Introduction                                          How are we taking opportunities in this
                                                       dynamic era to change old systems and models?
    “We design therefore we become”. This quote
from Jason Silva, one of the most influential               In this challenging scenario, this report
futurists of our time, sums up the changes we are      brings us content about how building a successful
facing in this digital era.                            model for cooperative governance, regarding the
                                                       organization of decision making processes and in
     Based on a set of principles and values we        the light of technological trends that may reshape
design the best tools to match our needs, to solve     our models.
the problems we want; at that time. The way we
get educated, the way we collaborate, the way we           This is an opportunity to rethink current
make our organizations last. All these tools, in the   models and design new approaches to innovate
end, shape the way we think, we act and interact.      in our organizations. From voting systems
We have designed the cellphone to overcome a           that ensures that every single voice is heard to
communication gap and now our devices shape            decentralized control to foster trust. All based
the way we interact with each other and with the       on and leveraging coop values. What we design
world through data.                                    shapes us and our environment back. In the end,
                                                       we design therefore we become.
GOVERNANCE COOP MODEL / Coop Governance Model

                                                Coop Governance Model
                                                     Financial cooperative institutions stand for        Coop governance is oriented by a set of              Resilience: proximity to communities
                                                responsibility and social cohesion since their       principles that also establish the constraints and   help coop banks to anticipate and adapt to
                                                creation in the 19th century. Supporting their       challenges in designing its model.                   new circumstances. Being able to change their
                                                operations, unique in the principle-based services                                                        objectives and design services in advance may
                                                and ownership model, innovative governance               Proximity to customers: coop banks               be essential to a faster decision-making process.
                                                models are designed as the fundamental structure     are part of their communities, having a deep
                                                                                                     connection with their customers. The local support       Solidarity: coop banks are deep-seated in
                                                to add value to their customers and members.
                                                                                                     stems from a dense network of branches.              real economy, providing credit to households
                                                And now, the pace of technology transformation
                                                                                                                                                          and small and medium enterprises. They
                                                is pushing forward their evolution.                                                                       promote entrepreneurship at the individual
                                                                                                         Democratic Structure: members and
                                                                                                     customers have a role in the coop governance         level, fostering the common good of society.
                                                    Deloitte, the largest professional services
                                                                                                     model. The “one member one vote” principle
                                                network in the world, defines Governance             shapes the governance structure.                        Sustainability: positive social impact
                                                Model as: “the mechanism used by the board                                                                comes with environmental responsibility: Coop
                                                and management to translate the elements of               Trust in relations: coop banks are              banks promote services and investments that
                                                the governance framework and policies into           relationship banks. Therefore, trust and             enables a sustainable development.
                                                practices, procedures, and job responsibilities      credibility are key. Governance model builds
                                                within the corporate governance infrastructure.”     trust by reducing misinformation often seen in
                                                                                                     the relation between clients, members, managers
                                                                                                     and directors.
Traditional     governance      model      is   institutions. As presented further in this report,
characterized by top down decisions: setting        a framework is needed to build more than a “one
objectives, defining managerial activities,         size fits all” model, and to create a path that will
committing to results for shareholders. A central   constantly help rethink a governance structure
body owns local branches and subsidiaries.          rooted in the coop values and flexible in order
Coop governance shifts this established model:      to adapt to our changing environment.
bottom-up decisions set the protagonism of
local branches that own the central institution.
Customers become members due to ownership,
being active in the definition of strategies and
having their voice heard equally.

    Besides this common and shared structure,
cooperative institutions work with a wide range
of governance models. Local needs, national
regulation, banking background and future
interests create different identities for the
GOVERNANCE COOP MODEL/ Technology and Governance

                                                   Technology and Governance
                                                       The constant changes in technology in the              Governance has an impact in the rapid              based on data. Therefore, data governance, data
                                                   banking sector impacts the business models,            adoption, or not, of trending technologies for         security, compliance risk and privacy are new
                                                   from the traditional banks to smaller cooperative      the transformation of traditional services into        board issues implicating different processes,
                                                   financial institutions.                                e-banking profile. Openness to innovation, risk        operations and strategies.
                                                                                                          taking, fast decision-making and agile product
                                                        Digitalization       brings        well-known     and service development are elements shaped by             digital governance: online voting, open
                                                                                                                                                                 virtual discussions and information access;
                                                   opportunities over product and service                 the governance model.
                                                                                                                                                                 these are some opportunities that increase
                                                   development. Accounts, credits and mortgage
                                                                                                                                                                 the influence and involvement of people
                                                   loans are easily offered online, replacing the             Which technological trends may impact the          in governance processes. Adopting these
                                                   face-to-face services at bank’s branches. But          governance structure of coop financial institutions?   technologies can decentralize dominant voices,
                                                   technology also opened the market to fintechs                                                                 leveraging participation of all and improve
                                                   that offer customer-oriented products. The focus            big data and predictive analytics: the            trust.
                                                   on customer experience and digital interface is        ability to collect massive amount of data and
                                                   attracting an increasing number of customers,          predict events. This technology can improve the            blockchain: decentralized storage of
                                                   shifting from old “brick only” models. At last,        efficiency on monitoring and tracking the usage        data and transactions between links. Thanks
                                                   digitalization is an opportunity for scaling up with   of resources, making possible to prepare for           to this fundamental element in the building of
                                                                                                          future effects like economic crisis or regulation      blockchains (blocks of information identical
                                                   a small investment.
                                                                                                          change. The use of information can empower             across the network) a blockchain can not be
                                                                                                          groups, making decision processes faster and           controlled by a single entity and has no point
of failure. Everyone is accountable in a distributed system where everybody register via a secure
validation mechanism. Governance can become fully transparent and verifiable when elections and
decision-making are run through blockchains.

    artificial intelligence: autonomous decisions in specific tasks within certain programmed
parameters. This technology autonomously solves complex problems, giving faster responses than
humans on credit applications or insurance pricing, based on gathered data. Virtual assistants chatbots
and automated personalized review summaries are already the implementation of artificial intelligence
in banking services and products. AI brings questions to managerial structure on accountability for
decisions made by algorithms.
    We heard experts from different areas of study, from coop governance
model to blockchain, to collect perspectives and insights that help to deep dive
in understanding governance model and digitalization opportunities.
Governance Models

                                                                                                                                                                         GOVERNANCE COOP MODEL/ Governance Models
                                         ERIC LAMARQUE
                                         Eric Lamarque is a professor at the University Paris 1 Panthéon Sorbonne within the IAE of Paris where he directs
                                     the Master of Finance. His research focuses on issues of strategy, governance, organization, and performance in financial
                                     institutions. Author of several articles and books on the management of banks, he works with the general management
                                     of financial institutions to assist them in restructuring and their development strategy, carrying out expertise and study
                                     strategic assignments. He is also a member of the Supervisory Board of Caisse d’Epargne Aquitaine Poitou Charente,
                                     Member of the Risk Committee, and Director of foundations and training organizations.

    We had a conversation with Mr. Lamarque              on two dimensions:                                               In order to collect data and validate the
about his experience with governance models and              1. the number of decision-making levels, split          identification of the governance models, Mr.
the impact he sees with adoption of technology.                 in three levels (local, regional and national        Lamarque conducted 15 interviews with 8 financial
Also, this article gathers inputs from two of his               or central);                                         cooperatives and received answers from 50 banks
papers and a book, all references are presented at           2. the influence and decision-making                    to a survey questionnaire.
the end of this report.                                         authority of each level, evaluated by three
                                                                criteria: the type of decision at each level,
    Although coop financial institutions share                  the effective level of autonomy and the
the same coop principles, they may diverge in                   influence of governance structure on the
a spectrum of governance models. In-depth                       management.
understanding of the processes that govern the
model is key for transparency and trust.                      Adding to this framework, four different
                                                         interactions were investigated that contribute to
     In his article “Identification and valuation of     the decision-making process in coop organizations:
cooperative banking Models”, published in 2014,          interactions between levels of management,
Mr. Lamarque conducts a study using a framework          interactions between governance and management
for analyzing coop governance and then assigning         structures, interactions between different levels
performance profiles, highlighting the different         of the governance structure, and interactions with
coop governance models. The analyses were based          members/customers.

                                               First highlights from the respondents were a common set of principles. Although they are implemented differently in each coop
                                            bank, they are what distinguish them from traditional banks. 4 principles were detailed:

                                           1 Unique practices for allocating earnings
                                             Members vote to determine the returns paid on ownership shares and evaluate the performance of general managers at the local and regional
                                             levels. Every member votes regardless of their equity share or in the amounts of their deposits.

                                           2 Autonomy
                                             Local boards have a role and an importance in the management. There is a common strategic alignment between local, regional and national levels
                                             and the autonomy of local manager depends on the degree of oversight provided by the upper level.

                                           3 Accountability
                                             General managers play a role of building relationship with customers and members that participate in the activities. Accountability, therefore, is
                                             an exercise of listening, providing support to members and respecting the relationships.

                                           4 Recognition
                                             freedom and autonomy to make decisions are primary incentives to elected officers, giving meaning to the work. In the same way, customers
                                             contributions as members are valued.
     In the end, three main governance model were identified by the cases studied:

1 Centralized governance model
  In this case, the organization counts on a central body with strong influence in the decision-making processes and able to push its authority across
  all levels. Elected members, general assemblies and boards provide assistance for management decisions made at the regional and local levels.

2 Shared decision-making model
  In this model, decision-making authority appears to be relatively significant at both national and regional levels. It’s a harder model to pin down
  given that the distribution of decision-making between levels tends to vary from one period to the next. Decisions are often built in common. In
  recent years regional entities have increased their level of influence on group decisions. Elected assemblies are consulted at the regional and local
  levels but do not set objectives.

3 Decentralized governance model
  local and regional level have significant authority over all key functions. The central body’s job is to monitor the performance of local entities,
  centralize financial data, support implementation of development strategies, and manage liquidity. This model can be broken down into two types,
  with decision-making authority being concentrated at either the local or regional level. Elected assemblies at the regional and local levels are
  consulted and may participate in making strategic decisions and defining objectives.

     Based on all this experience, when asked about how governance models are adapting to digitalization opportunities, Mr. Lamarque
 points out the better circulation of information inside the organization. Virtual tools and technologies may improve participation of
 members, promoting virtual proximity to general assembly, organizing voting, even remote voting to elect board members. This brings
 more people to discuss, increasing diversity and enabling more communities to engage in the decision-making. Digitalization when
 applied to these processes improve transparency, make representation more legit and strengthen relationships.
Blockchain Opportunities and Challenges

                                                                             PEDRO ANDRADE
                                                                              Pedro Andrade is an entrepreneur, full stack developer, emerging technologies consultant, decentralized solutions
                                                                         architect and instructor. He has worked as innovation and digital transformation consultant in the retail market. More
                                                                         recently, he has been given blockchain and smart contract trainings in Latin America and worked in a mobility ICO (Initial
                                                                         Coin Offering) in Austria. He uses his software development skills to bring ideas to life, mainly about positive social impact.
                                                                         Pedro helps organizations to understand emerging technology, mainly Blockchain and decentralized technologies, and its
                                                                         impacts in their businesses.

                                        We did an interview with Pedro and talked            under control by any particular peer and can’t be              implicate?
                                    about the changes and opportunities that                 frauded, participants can trust the system and
                                    organizations may find in this (still) underexplored     work together.                                                      I believe that the digitalization is a great
                                    technology of blockchain.                                                                                               opportunity to rethink organization’s processes
                                                                                                  Other key aspect of blockchain technology                 to ensure that things are being done in the most
                                       1. Blockchain may threaten some of                    that could inspire the creation of new models of               efficient way. In the case of voting, we could
                                    the current governance systems. What                     governance is how incentivization is used over                 start by asking ourselves: when voting is the
                                    aspects of governance may be impacted by                 restrictions to obtain certain desired outcomes.               best approach to decision-making and when it
                                    blockchain technology?                                   The idea is to add a charge for an action instead              is not? What could we do instead of voting? Who
                                                                                             of forbidding it because the latter would require              should be allowed to vote? What are the fairest
                                        The biggest impact in my opinion is allowing         more control over the network.                                 voting mechanisms?
                                    people who don’t know or trust each other
                                    to collaborate on decision-making. One very                 2. Participation in a traditional                                A couple of examples:
                                    known example is called DAO (Decentralized               governance model is proportional to the
                                    Autonomous Organization) which is basically a            company share. Coop model is based                                  We may wish to always vote for ourselves
                                    set of smart contracts that, among other things,         on ‘one member one vote’ for electing                          in themes A and B but, because we trust a peer
                                    allow participants to submit, fund and vote for          representatives. How may digitalization                        X on the matter C, we can leave to X all the
                                    projects. Because the source code is public, run         and blockchain technologies foster this                        decisions regarding this matter. This delegation
                                    by many computers worldwide which are not                coop principle and which changes may it                        mechanism can make voting process faster and
increase the quality of decisions.                        4. In financial institutions, auditing            suggest a framework called “5 x 5 x 5” where
                                                      plays a center role in creating trust in              proof-of-concepts are restricted to a maximum
    Quadratic voting is a procedure that allows       processes. How do you see this changing               cost of US$ 5000, carried out in maximum 5
voters to express the intensity of their desires      in the face of blockchain?                            weeks by maximum 5 persons. The main goal is

                                                                                                                                                              GOVERNANCE COOP MODEL/ Blockchain
by buying voting power. So, instead of each                                                                 gathering information about assumptions which
participant having one vote, they could have many          First generation blockchains like Bitcoin can    will lead to better decisions when choosing the
according to how much they care about certain         be seen as a public, decentralized, distributed       next projects.
issues. Besides the price increasing exponentially    and append-only databases. Although these
we could also place other restrictions to ensure      characteristics - along with some cryptographic           6. Interesting references (links,
the procedure is fair and is not monopolized by       mechanisms, make conventional auditing                sites, articles, books) about blockchain
richest voters.                                       virtually unnecessary, it would be troublesome        and digital governance that you’d like to
                                                      for a financial institution to adopt a blockchain     share:
    3. What are the biggest challenges and            like that due to privacy, law requirements and
gains of adopting a decentralized model in            many other factors.                                       - Blockchain Governance: Programming
decision making processes? Does it have                                                                     Our Future:
different implications comparing a big,                   What I imagine as an initial step is        
nationwide company and a small, local                 incorporating some of blockchain’s features to        blockchain-governance-programming-our-
one?                                                  improve the systems that are in place. For example,   future-c3bfe30f2d74
                                                      having an append-only shared ledger between
     I think biggest companies have more to gain as   financial institutions could make consolidation          - Quadratic Voting:
they are more likely to have complex governance       an automatic process.                                 quadratic-voting/
processes that could be simplified and broadened
at the same time. The biggest gains are exactly          5. How can an organization evaluate its                - Colony project:
this: allowing more participation even from           readiness to these trends in blockchain?
outside the organization if desired.
                                                          For conventional organizations it may be a
     The biggest challenges are understanding the     challenge to adopt blockchain as it would imply
decentralized mindset and the consequences of it,     to decentralize at least part of the control the
like: having to spread the control to participants,   organization holds. It is most likely to be easier
respecting the outcome of decisions, being mindful    in cooperatives as they are by nature more
of all the possible interactions from participants,   decentralized as decisions are made collectively.
correctly align the incentives to reward actors
who contribute to the network and disincentivize          My suggestion is always having a budget to
bad actions, etc.                                     experiment and pilot a few ideas and technologies
                                                      every year. It doesn’t need to be much. In the
                                                      book “Innovator’s hypothesis” Michael Schrage
Coop Governance Principles
GOVERNANCE COOP MODEL/ Governance Principles

                                                                                        RAYMOND OLIGER
                                                                                       Raymond Oliger holds a degree in philosophy and psychology. He is the former President of Banque Populaire Lorraine
                                                                                    Champagne and of the Fédération Nationale des Banques Populaires. He served as Vice President chair of CIBP and is a
                                                                                    former member of BPCE Supervisory Board

                                                  Mr. Oliger led a working group on governance model in CIBP in 2014. The output was a series of documents comparing models from CIBP
                                               members and other key findings regarding the interaction of coop values and governance.

                                                   The group did a survey within the CIBP community that confirmed the range of governance models, shaped by their respective environment.
                                               Besides the advantage of flexibility in different models, this may bring a lack of consistency, opening an opportunity for regulators to apply the
                                               same rules as traditional financial institutions.

                                                   The study brings five important perspectives that should be considered for assessing a coop governance model:

                                               1 Balance on the Boards
                                                  Representation is key on the elected board and the appointed executive structure. Considering geographic representation favours proximity,
                                                  diminishing the gap of local concerns and strategy. Socio-professional balance enables cross-over between economic activities. Age and gender
                                                  balance should also be considered. A balanced representation avoids keeping influence of the same groups

                                               2 Credibility
                                                  Representation is key on the elected board and the appointed executive structure. Considering geographic representation favours proximity,
                                                  diminishing the gap of local concerns and strategy. Socio-professional balance enables cross-over between economic activities. Age and gender
                                                  balance should also be considered. A balanced representation avoids keeping influence of the same groups
3 Transparency
  access to reliable information is a responsibility towards shareholders. This is fundamental for general meetings, that should be complemented by
  meetings held in the different locations, engaging more shareholders in discussing relevant issues to the bank.

                                                                                                                                                      GOVERNANCE COOP MODEL/ Governance Principles
4 Independence
  the independence of the deliberative and executive structures should not be a challenge for coop governance. Limiting the number of mandates of
  elected board and making the “one member one vote” model an universally principle are options to guarantee the independence.

5 Long-term outlook
  the sustainability of the model, carrying for the long-term coop principles, can be achieved by management strategies. Focus on management
  performance in the mid and long-term, disconnect remuneration from share and results and make impossible to share reserves are options
  investigated in the study.

     But, from five to ten years ago, digital revolution shifted the analyses over the fundamental aspects of cooperative governance
 model. As highlighted by Mr. Oliger, they are three: participation, representation and information. Physical distance that separated
 members, local organizations and the central decision body shrank with the virtual boundaries of internet. The high costs for sharing
 information and the logistics of correspondence to voting in assemblies were replaced by accessible tools for participation and for

     Technology disrupts practices on the above governance perspectives and therefore may have a crucial role in nowadays assessments.
 Digitalization can leverage the balance on the boards reaching a wider panel not only of electors but also of candidates. Direct participation
 of members via digital tools and also leads to direct democracy, strengthening transparency. No organization would refuse to give access
 to open information to its members and regulators. Therefore, it is necessary to adopt and improve new communication channels.

      The challenge to adapt coop governance models are not only to the technological evolution but also to new mentalities. Mr. Oliger
 states then: “This revolution-evolution will prevail only if we have the ability to keep a clear vision of our fundamentals and to stay
 faithful to them”.
Conclusion and outlook

                                                                                                                                              GOVERNANCE COOP MODEL/ Conclusion
    Governance requires a high level of commitment and a deep understanding of the process. For coop organizations, we must add a
tight connection to principles and values.

     The governance structure for a coop financial institution does not have a standardized model. Expert Eric Lamarque described a
framework used in assessing different models, considering important aspects such as the number of decision-making levels and the
influence and authority of each level. Also, it is important to consider the relationship between different parts of the structure, such as
different levels of management, governance and members. Expert Raymond Oliger also described the importance of assessing coop
governance model in the face of principles of cooperative governance, highlighting criteria like balance, transparency, credibility,
independence and sustainability.

    Rethinking governance is an opportunity to take a step towards innovation. Digital technologies leverage the chance to reinforce
tools to make processes faster, more transparent and reliable to all stakeholders. Expert Pedro Andrade points out the collaboration
in decision-making process that blockchain technology can foster.

    Values are the cornerstone that differentiate cooperative governance from traditional models. Management activities, deliberation
processes and ownership are shaped by these values. Relevant cases of bigger autonomy to local branches and cases of centralized
goals setting should be explored in further work, adding value to this governance discussion.

                                       Developing an effective governance operating model - A guide for financial services boards and
                                    management teams:

                                        MIGLIORETTI, Marco et all. 2018. “New Cooperative Banking in Europe – Strategies for Adapting the
                                    Business Model Post Crisis”. IAE Université Paris 1 Panthéon-Sorbonne.

                                        DEVILLE, Aude and LAMARQUE, Eric. 2014. “Cooperative Banking Report: Identification and Valuation
                                    of Governance Models”. International Summit of Cooperatives Quebec 2014.

                                       ALBERT, Stéphane and LAMARQUE, Eric. 2016. “The impact of financial regulation on policy and risk
                                    management in financial cooperatives”. International Summit of Cooperatives Quebec 2016.

                                        “Data governance: securing the future of financial services Financial Services”. Leadership Summit
                                    January 2018

                                        European Association of Co-operative Banks -

                                        Blockchain Technology Guide -
2nd Edition | 2019

All rights reserved.

CIBP Members
Banque Populaire du Maroc
BPCE - Banque Populaire and Caisse d’Épargne
BVR - Bundesverband der Deutschen Volksbanken und Raiffeisenbanken
CPH Banque
DZ Bank
ÖGV Österreichischer Genossenschaftsverband
Volksbank Wien
Sicoob Sistema de Cooperativas de Crédito do Brasil

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